“It’s Scary, And I’ve Never Seen Anything Like It” – Where Markets Are The Morning After


For those of you who are just waking up, first of all, congratulations. Here is what you missed.

European, Asian stocks and S&P futures plummet, as U.K. votes to leave European Union membership. FX carry trades everywhere go haywire, with the Dollar and Yen spiking while the Cable overnight plunged to 30 year lows and at last check was trading just around 1.37, down 1,300 pips from yesterday’s highs. A modest rebound was experienced when first the Bank of England and shortly after all other central banks promised to pump virtually unlimited liquidity into the financial system. Ironically, all of this takes place a day after Fed’s stress tests showing all 33 banks exceed minimum requirements  – we may find out just how “unstressed” they are as soon as today.

For those who are pressed for time, the following quote from James Butterfill, head of research and investments at ETF Securities, summarized it best: “It’s scary, and I’ve never seen anything like it. We’re going to see outflows from basically any kind of cyclical asset. A lot of people were caught out, and many investors will lose a lot of money.”

Here are key market updates:

  • S&P 500 futures down 3.9% to 2023
  • Stoxx 600 down 7% to 322
  • MSCI Asia Pacific down 4.1% to 125
  • US 10-yr yield down 22bps to 1.53%
  • Dollar Index up 1.86% to 95.27
  • WTI Crude futures down 4.2% to $48.00
  • Brent Futures down 4.3% to $48.70
  • Gold spot up 4.2% to $1,310
  • Silver spot up 2.8% to $17.77


  • U.K. Votes for Brexit as Cameron Resigns After Historic Rupture: Prime minister to step down as Johnson weighs next step
  • Pound Plunges to 30-Year Low as U.K. Assets Slide on Brexit: ‘There are certain days you never forget,’ says HSBC’s Bloom
  • Carney Pledges $345 Billion to Fund First Line of Brexit Defense: Markets bets on a July interest rate cut climb to 50%
  • Nationalist Parties Seize on Brexit to Demand Own EU Referendums: Le Pen, Wilders, Northern League call for vote
  • Biggest U.S. Banks Seen Weathering Severe Stress in Fed Test: Regulators release results of Dodd-Frank mandated exercise
  • Oil Tumbles After Brexit Vote as Traders Assess Lasting Impact: WTI, Brent down >6.6% as traders flee risky assets
  • Gold Sees Biggest Gain Since 2008 in Rush for Havens From Brexit: Sterling-denominated gold jumps 15%, the most ever
  • Xerox Appoints Jeff Jacobson as New Chief After Co. Split: Jacobson named as incoming CEO of document technology seller
  • Albemarle, Fortive to Join S&P 500; Emcor Named to MidCap 400: Changes to be implemented after close of trading June 30


European shares sinks after U.K. voted to quit the European Union. All 19 Stoxx 600 sectors fall with banks, insurance underperforming and health care, food & beverage outperforming. 90% of Stoxx 600 members decline, 10% gain. “It’s scary, and I’ve never seen anything like it,” said James Butterfill, head of research and investments at ETF Securities, said by phone from London. “We’re going to see outflows from basically any kind of cyclical asset. A lot of people were caught out, and many investors will lose a lot of money.”

As the win for the Leave campaign in the EU referendum became clear, global equities plunged with the FTSE 100 falling as low as 8%, led by sharp losses in financials with UK banks (Barclays, Lloyds, RBS) lower by around 30% which has seen the iTraxx senior financials 5yr index (CDS on banks) soar to its highest level since February. As such, the fear of contagion from this outcome has seen European bourses heavily in the red (DAX -10%, Euro Stoxx -9%), while the E-mini S&P 500 saw a 5% fall to hit limit down.

However, in recent trade, equities have pulled off worst levels as markets find relative calm amid the BoE Governor stating that the central bank is willing to provide liquidity in the form of GBP 250b1n, while David Cameron announced that he will remain as PM till October in order to combat any immediate instability. Elsewhere, Gilt yields have seen its largest drop since 2009 to yet again print fresh record lows as investors flock to safe haven assets, while Bunds staggeringly opened slightly below 169.00 before paring somewhat, back to around 166.00. Of note, in the wake of the Brexit outcome, S&P have warned that the UK could lose its AAA sovereign rating, while the likes of Goldman Sachs, JP Morgan and ING have all forecast an upcoming BoE rate cut.


  • Stoxx 600 down 7% to 322
  • FTSE 100 down 5.3% to 6003
  • DAX down 6.6% to 9579
  • German 10Yr yield down 17bps to -0.08%
  • Italian 10Yr yield up 11bps to 1.51%
  • Spanish 10Yr yield up 11bps to 1.58%
  • S&P GSCI Index down 2.7% to 370.3


  • Finance Chiefs Dismay Brexit as Bank Stocks Plunge Across Europe: Deutsche Bank CEO calls decision “negative on all sides”
  • SNB Steps Into Currency Market Amid Brexit-Induced Stress: Swiss policy makers have repeatedly threatened interventions
  • German Ifo Confidence Improved Even as Brexit Threat Loomed: Ifo business climate index rises to 108.7 from 107.8
  • Deutsche Boerse Reaffirms Plan to Buy LSE After Brexit Vote: LSE equity holders to own 45.8% of the enlarged company
  • S&P Prepares U.K. Ratings Downgrade as Britain Votes to Leave EU: S&P sees period of uncertainty that may prevail for years
  • Henkel to Buy Sun Products for $3.6 Billion in Biggest U.S. Deal: Deal gives company No. 2 position in U.S. laundry care
  • Rexel Fires CEO Provoost After Disagreement on Governance: Company veteran Patrick Berard named CEO as of July 1
  • Air France-KLM Names Janaillac CEO and Chairman as of July 4: Janaillac to become chairman and CEO from July 4
  • EDF CEO Says Strategy in U.K. Won’t Be Affected by Brexit Vote: Vote has no impact on co.’s strategy, Levy says
  • IAG Sees Brexit Volatility Reducing Profit Growth This Year: No longer sees absolute op. profit increase in FY like ’15


Asian stocks slumps, heading for the steepest drop in 10 months. All 10 sectors drop in the MSCI Asia Pacific Index with materials, consumer discretionary underperforming and utilities, information technology outperforming. Yen briefly surged past 100 as Brexit in Lead in Results. “Fear is normally easier to profit from than greed. This is what we are seeing today,” said Ang Kok Heng, Kuala Lumpur-based chief investment officer at Phillip Capital Management Bhd., which oversees $630 million in Kuala Lumpur.

BoJ Governor Kuroda said he is ready to supply sufficient liquidity and to carefully watch effects on markets.

Risk assets tumbled overnight as the UK vote to leave the EU, which saw FTSE 100 futures briefly decline below the 5800. This also saw losses of around 200 points to the E-mini S&P and crashed Asian equity markets with Nikkei 225 declining as much as 8%, with Osaka futures triggering circuit breakers. Elsewhere, Shanghai Comp and Hang Seng conformed to the global sell-off with UK dual-listed financials including HSBC, Prudential and Standard Chartered under heavy pressure in Hong Kong taking on a likely Brexit. Finally, 10yr JGBs outperformed while T-notes rose around 2.5 points as the Brexit woes spur heavy flows into safer assets which also pushed gold higher by USD 80/oz. Japanese Finance Minister Aso pledged to take measures to calm markets and added that a Brexit will not have a sudden impact on the Japanese real economy.


  • MSCI Asia Pacific down 4.1% to 125
  • Nikkei 225 down 7.9% to 14952
  • Hang Seng down 2.9% to 20259
  • Shanghai Composite down 1.3% to 2854
  • S&P/ASX 200 down 3.2% to 5113


  • Yen Soars Past 100 Per Dollar as U.K. Vote Spurs Rush to Safety: Currency surges 18% versus pound as Britons choose Brexit
  • Offshore Yuan Drops Most in Five Months as Brexit Victory Looms: PBOC injects most funds this week since April via operations
  • HSBC, Standard Chartered Lead Asia Bank Rout as U.K. Votes ‘Out’: Banks have warned of U.K. job cuts in case of Brexit
  • Brexit Brings Short-Lived Pain for India’s Largest IT Exporters: Cos. may benefit from increased demand in long term
  • Hong Kong’s China Tourist Malaise Deepens From Bling to Buns: Sa Sa profit plunge 54% on poorer cosmetic sales to Chinese

In FX, the aftermath of the UK vote to leave the EU has seen Cable plummeting from its highs, whichmanaged to print a 1.5000 handle before the news starting hitting the wires from the first regions reported. The sell-off led to the key spot rate recording lows around 1.3230, but the fallout has since been tempered, with what is an impressive recovery to within 30 ticks or so of the 1.4000 mark before moving back towards 1.3700. EUR/GBP highs tipped .8300, but London has since seen the cross rate dipping under .8000, but it is all early days as yet. Gains in the JPY and CHF have been notable also, but both the BoJ and SNB will have intervened to some degree — the SNB confirming as much after EUR/CHF well into to the low 1.0600’s. USD/JPY took out 100.00 to print lows ahead of 99.00, but the recovery here —alongside some moderation in equities — has seen the 103.00 attained, but struggling to maintain a foothold here —understandable in the current climate. AUD, NZD and CAD have all lost out, but have been fighting back since —AUD in particular now only 2.5 cents off the overnight highs.

In commodities, heading into the North American crossover, WTI and Brent crude futures remain pressured on the back of the strength in the greenback, as such prices hover below USD 48 and USD 49 respectively. In terms of specific newsflow it has been somewhat muted given the focus revolving around the UK referendum. Separately, gold prices outperformed with participants flocking to safe-haven assets with the precious metal reaching highs of near USD 1360/oz in light of the EU referendum result, before paring some of the moves to head into the North American open around USD 1318/oz.


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